The currency bloc’s powerhouse sold 4.56 billion euros ($5.8 billion) of its new two-year Schatz auctioned earlier Wednesday with a zero percent coupon — the first time this has happened on debt of such long maturity.

The yield on the bond stood at just 0.07 percent after the auction, the lowest-ever yield for the two-year bond.

“The markets are putting together a higher probability for the end-game in the euro zone, otherwise why would you do that?” O’Neill said in reference to the strong buyer demand for the bond, describing it as “uncharted territory.”

Euro Zone Needs to Become United States of Europe: O'Neill

Jim O'Neill, chairman of Goldman Sachs Asset Management, told CNBC, "Once one country exits the euro zone it breaks the notion of it being a true currency union and some king of hard currency peg, so that is a big moment and they will have to respond very clearly and critically to not only ring fence the others but make is clear that no one else is going to leave."

The success of the auction is being seen as a sign that investors are so nervous about the precarious politico-economic situation in the euro zone that they are willing to get paid zero interest just to get shelter in the region’s safest bonds.

O’Neill said that euro as created was flawed, and the crisis in the euro zone was a moment for the French and Germans to decide whether they really want a unified bloc.

“The Greek elections were a cathartic moment. Politicians are trying to make Greek people realize what’s at stake here,” O’Neill added. “They need to get to a United States of Europe.The French and Germans have to be truly European and they are not being truly European.”

He warned that the exit of one country would damage the rest of the bloc.

“Once one exits, it breaks the notion that it’s a true currency union and that is a big moment,” O’Neill said. “They have to respond and ring-fence clearly, and make it clear that no one else will leave.”

He added that despite the magnitude of the situation in Europe, it was “not the only thing that mattered.”

“I think that the U.S and China drive the world and as long as that show carries on the rally will return,” O’Neill said.